Paul Farrell writes about Scott Adams’ (of Dilbert fame) simple 9-point formula that captures “everything you need to know about personal investing”. Here is the list (with one slight modification for Canadians. I’ve removed “Fund your IRA to the maximum” and added point #6):
- Make a will
- Pay off your credit cards
- Get term life insurance if you have a family to support
- Fund your RRSP to the maximum
- Buy a house if you want to live in a house and can afford it
- Pay down your mortgage (if you have one) as fast as possible
- Put six months worth of expenses in a money-market account
- Take whatever money is left over and invest 70% in a stock index fund and 30% in a bond fund through any discount broker and never touch it until retirement
- If any of this confuses you, or you have something special going on (retirement, college planning, tax issues), hire a fee-based financial planner, not one who charges a percentage of your portfolio
It is hard to quibble with the list, though I would have probably said “a few months worth of expenses” for #7. The sad truth about personal finances is that simple is usually best and most of the fancy products that the investment industry keeps churning out (hedge funds, principle-protected notes, wrap accounts) are best avoided. Now, if you would excuse me, I’ve been putting off making a will, so I’d better get right to it.
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6 responses so far ↓
1 Alex Givant // Oct 11, 2006 at 10:44 am
It remembers me Dave Ramsey’s Baby Steps (for more info, check here http://en.wikipedia.org/wiki/Dave_Ramsey#The_Baby_Steps).
2 DeVirt // Oct 11, 2006 at 12:09 pm
Nice list
Reminded me Albert Einstein’s saying: “Everything should be made as simple as possible, but not simpler”. Very true about Ramsey who “has been criticized in financial circles for too often offering overly-simple solutions to sometimes complex financial issues” (http://en.wikipedia.org/wiki/Dave_Ramsey#Criticism).
3 award tour » dilbert’s financial plan // Oct 11, 2006 at 1:07 pm
[...] Canadian Capitalist » Dilbert’s Financial Plan. a very simple list for financial security. [...]
4 award tour // Oct 11, 2006 at 1:08 pm
dilbert’s financial plan…
Canadian Capitalist » Dilbert’s Financial Plan. a very simple list for financial security.
……
5 Wealthy Geek // Oct 11, 2006 at 2:23 pm
I would even go further with this list and say pay down all debts (not just your mortgage) as fast as you can. This was my strategy with my student loan: I budgeted to make additional payments every month and funneled any extra money I came across (freelance work, pay raises, employee bonuses, etc) onto the principal. It took a lot of discipline, but it saved me thousands in interest payments over the long haul. Remember: each debt paid off ahead of schedule creates glorious wiggle room in one’s monthly budget.
6 My Five Basics for Financial Success // Jun 1, 2008 at 8:05 pm
[...] be automated and (5) Have the talk. You can check out his column here. The list is similar to Dilbert creator Scott Adams’ simple 9-point formula and Dave Ramsey’s Baby Steps. Here are my five basics for financial [...]
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